OPTIONS EDUCATION GLOBAL

Size: px
Start display at page:

Download "OPTIONS EDUCATION GLOBAL"

Transcription

1 OPTIONS EDUCATION GLOBAL

2 TABLE OF CONTENTS Introduction What are FX Options? Trading 101 ITM, ATM and OTM Options Trading Strategies Glossary Contact Information HIGH RISK WARNING: Before you decide to trade either foreign currency ( Forex ) or options, carefully consider your investment objectives, experience level, and risk tolerance. Over the counter leveraged Forex spot trading ( spot trading ) and options trading ( options trading ) both carry high levels of risk that may not be suitable for all investors. Educate yourself on the risks associated with spot and options trading, and seek advice from an independent fi nancial or tax advisor if you have any questions. With spot trading, you could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Leverage, offered as part of spot trading, creates additional risk and loss exposure. With options trading, you could not only lose all of your initial investment, but the potential to lose money is potentially unlimited when you write an option. Purchasers and sellers of Forex options should familiarize themselves with the type of option (i.e., put or call) that they contemplate trading and the associated risks. You should calculate the extent to which the value of the options must increase for your position to become profi table, taking into account the premium paid, other transaction costs, if any, and rate of premium/time decay.

3 INTRODUCTION WELCOME TO FXDD S INTRODUCTION TO OPTIONS GUIDE! FX options are a smart investment alternative for traders of all experience levels. Throughout the course of this guide, you will learn the basic trading terms and a few strategies to help you get started on the right foot. Let s get started by explaining what an option is. To keep it simple, we will use the example of options on stocks to illustrate the comparison. WHAT IS A STOCK VERSUS AN OPTION? When a stock is purchased, it signifi es that the buyer now owns a claim to the company and its assets. This means that when a company s stock value rises, so too does the value of the owner s stock. Similarly, when the company s stock value falls, the value of the owner s stock also falls. An option, on the other hand, is a contract to buy or sell an asset (whether it is a stock or currency) in the future. However, an options contract holder is not obligated to go through with, or exercise, the purchase or sale of the underlying asset. Thus, a stock option allows the trader to take a position on the company without actually having to own the stock. THANKS TO THE NATURE OF THE FOREX MARKET, FX OPTIONS OFFER CERTAIN ADVANTAGES OVER THEIR EQUITY OPTION COUNTERPARTS. OPTIONS MITIGATE RISK When a stock trader owns a stake in a company, his risk exposure correlates directly to the company s performance. If the price of the stock falls, the trader will incur losses. Option traders pay a fi xed premium to buy an options contract, since they are not obligated to exercise the contract. A stock options trader could protect his profi ts in case of a falling stock price with a put for a fi xed premium cost, but does not have to exercise the contract if the price keeps going up. Forex traders participate in a much faster-paced, higher-risk and more volatile market. FX options offer similar risk protection to mitigate the potentially harmful effects of unexpected market swings. OPTIONS EDUCATION 3

4 TRADING AROUND THE WORLD Stocks and stock options are commonly traded on an exchange, meaning that traders can only trade during the certain designated hours that the exchange is open. In contrast, the FX market is a decentralized exchange that operates seamlessly through international fi nancial centers across the world. FX options traders can take advantage of this unique trading environment by capitalizing on opportunities 24 hours a day, 5.5 days a week. LOWER TRADING COSTS The premium, or cost to buy an option, is denominated using the same metric as the price of the underlying asset. Thus, stocks and stock options are denominated in USD (or other local currency) per share. Forex trades approximately $4 trillion per day, making it a highly liquid market. The frequent and sizable trades make FX a competitive landscape for brokerages and banks. Competition drives down the cost of execution, resulting in spreads that are tighter than any other asset class. LEVERAGE/MARGIN Forex traders outside of the United States can trade with leverage of up to 200:1. With FXDD, we allow 100:1 leverage, or trading with 1% margin. In comparison, when buying a stock, traders must pay the full value for their stake in that company, essentially getting 1:1 leverage. FX OPTIONS TRADER PROFILE Do you have what it takes to be an FX options trader? Let s take a look at our average trader. Trader: Johnny Options Minimum Deposit: $5,000 Average Deposit: $15,000 Trading Experience: Options on US Stocks Trading Platform: FXDD Options Trader Johnny Options is a middle-aged trader who has extensive experience trading equity options. He has never traded currencies but is intrigued by FX options because of the 24-hour trading day. Instead of ending his trading at 4:00 pm, like other stock and equity options traders, Johnny has more flexibility to fi nd tradable opportunities around the clock. OPTIONS EDUCATION 4

5 WHAT ARE FX OPTIONS? FX OPTIONS ARE FINANCIAL CONTRACTS BETWEEN TRADERS AND DEALERS While more traditional stock options are traded on an exchange, FX options are contracts that traders and dealers enter into with one another when they buy and sell to each other. A trader can either buy an FX option from a dealer or sell an FX option to a dealer. The person buying an options contract is the holder and the person selling an options contract is the writer. WRITER HOLDER THERE ARE TWO FUNDAMENTAL TYPES OF FX OPTIONS A call option gives the holder the right (but not the obligation) to buy from the writer so many units of a currency at a specifi ed price, known as the strike price. A put option gives the holder the right (but not the obligation) to sell to the writer so many units of a currency at a specifi c price, known as the strike price. The strike price, also known as the exercise price, is the stated price that the buyer of a call can buy a specifi c currency at, or the stated price that the buyer of a put can sell a specifi c currency at. CONTRACT SIZE An option s size specifi es the number of units of currency that one option contract leverages. Contract sizes are different for options written on different currency pairs. CURRENCY PAIRS FX options contracts are quoted in base/quote currency pairs. The base currency is known as the underlying currency. You always buy and sell foreign currencies with your domestic currency and buy and sell foreign currency options with your domestic currency. EUR/USD BASE QUOTE For example, a spot price for EUR/USD of 1.5 means that 1 euro costs $1.5. A EUR/USD call option with a strike price of 1.6 and an ask price of.02 would cost the buyer $.02 and give him the right to purchase euros at a price of $1.6 per euro. The ask price is the price at which the spot market or an option can be bought. The bid price is the price at which the spot market or an option can be sold. The spot price is the available rate for an immediate exchange of currency. To incorporate the base/quote price-quoting convention into our defi nitions, a call option gives the holder the right to buy so many units of the base currency from the writer at a strike price expressed in the quote currency. A put option gives the holder the right to sell to the writer so many units of the base currency at a strike price expressed in the quote currency. OPTIONS EDUCATION 5

6 TRADING 101 WHEN YOU BUY OPTIONS, YOU CREATE A LONG POSITION. WHEN YOU SELL OPTIONS (WRITE AN OPTION), YOU CREATE A SHORT POSITION. If you think a currency s price will rise, buy calls or sell puts. If you think a currency s price will fall, buy puts or sell calls. If you believe the price of a base currency is likely to rise relative to a quote currency, then, as a simple trading strategy, you may want to buy calls or sell puts. That is, you may want to go long calls or short puts. If you believe the price of a base currency is likely to fall relative to a quote currency, then you may want to buy (go long) puts or sell (go short) calls. If you buy an FX call or a put, you pay for the option in the quote currency. If you sell an FX call or put, you have been paid for it in the quote currency. For every options contract, there is an expiration date. Upon expiration, an option can no longer be traded or exercised. For a given currency pair, dealers quote prices for options that have different strike prices and expiration dates. A dealer s price quotes sort options by their strike prices and expiry months and years. Typically, options expire in the third week of the month or the end of the month. Each dealer handles expiration differently. PRICE RISES PRICE FALLS = BUY CALLS OR SELL PUTS TO PROFIT. = SELL CALLS OR BUY PUTS TO PROFIT. FXDD S FX OPTIONS ARE EUROPEAN STYLE, MEANING THEY CAN ONLY BE EXERCISED AT EXPIRATION. Exercising an option means that you take advantage of your right to buy or sell at the strike price. If you exercise a call option, you sell your call option for a premium and you go long the spot market at the strike price. If you exercise a put option, you sell your put option for a premium and you go short the spot market at the strike price. OPTIONS EDUCATION 6

7 TRADING OPTIONS WITH FXDD An option s price or premium is the amount of money the buyer pays to enter into the contract. Dealers quote option prices in the quote currency at a price per unit of the base currency. The total price that the buyer pays to enter into one contract is (Quoted Price) x (Contract Size), then converted into the dealer s deposit currency such as dollars, euros or yen. Dealers quote different ask and bid prices. The ask price is the price at which the dealer will sell you an option. The bid price is the price at which the dealer will pay for an option. - At a given moment in time, for a given option, a dealer s ask price is always higher than their bid price. The bid-ask spread is a main source of a dealer s compensation. FX CALL AND PUT CONTRACT SPECIFICATIONS Whether you are engaging in an FX call or FX put option, there are certain components involved. A call option gives the holder the right to buy so many units of the base currency from the writer at a strike price expressed in the quote currency. A put option gives the holder the right to sell to the writer so many units of the base currency at a strike price expressed in the quote currency. ELEMENTS OF AN FX OPTION FX CALL OPTION Base/quote currency pair Strike price is the price expressed in the quote currency at which the holder is entitled to buy the base currency from the writer. Contract size is the number of units of base currency that the holder is entitled to buy from the writer. Expiration date Option price or premium to be paid in quote currency. FX PUT OPTION Base/quote currency pair Strike price is the price expressed in the quote currency at which the holder is entitled to sell the base currency to the writer. Contract size is the number of units of base currency that the holder is entitled to sell to the writer. Expiration date Option price or premium to be paid in quote currency. OPTIONS EDUCATION 7

8 ITM, ATM AND OTM IN THE MONEY (ITM) A call option is in the money if the market price of the base currency is greater than the option s strike price. A put option is in the money if the market price of the base currency is less than the option s strike price. Price OTM CALLS ITM PUTS Current Value AT THE MONEY (ATM) A call option is at the money if the price of the base currency is equal or closest to the options strike price. A put option is at the money if the base currency is equal or closest to the options strike price. OUT OF THE MONEY (OTM) A call option is out of the money if the option s strike price is greater than the market price of the base currency. A put option is out of the money if the option s strike price is less than the market price of the base currency. WHAT HAPPENS WHEN MY OPTION EXPIRES? OTM PUTS ITM CALLS Time A call option is in the money if the market price of the base currency is greater than the option s strike price. A put option is in the money if the market price of the base currency is less than the option s strike price. If, at the time a call expires, the base/quote spot price is above the option s strike price, then the option has a positive payoff: Call Payoff = Spot Price Strike Price If, at the time a put expires, the base/quote spot price is below the option s strike price, then the option has a positive payoff: Put Payoff = Strike Price Spot Price If an option expires with a positive payoff, then the holder may either exercise the option or accept a cash settlement. If the holder exercises a call, he or she buys the underlying currency from the writer at the call s strike price. If the holder exercises a put, he or she sells the underlying currency to the writer at the put s strike price. If the option has a positive payoff and the option settles in cash, then the holder receives from the writer a cash settlement: Cash Settlement = Payoff x Contract Size OPTIONS EDUCATION 8

9 OPTIONS TRADING STRATEGIES Whether trading in a volatile or stagnant market, FX options present opportunities and strategies for any market condition. Two of these strategies are straddles and strangles. Straddles are options strategies executed by buying or selling both a call option and a put option with the same strike and expiration. Strangles are options strategies executed by buying or selling both a call option with a lower strike price and a put option with a higher strike price with the same expiration. Long Strangles/Straddles are both strategies that allow the trader to gain on signifi cant moves either up or down in a currency s price. These strategies are good for volatile markets. Short Strangles/Straddles are both strategies that allow the trader to gain on the lack of signifi cant moves in a currency s price. These strategies are good for stagnant markets. As a general rule, traders prefer to sell straddles and buy strangles when the expiration date is far in the future; conversely, they prefer to buy straddles and sell strangles when the expiration date is in the near future. STRADDLES If the trader expects a currency to make a large move one way or the other but doesn t know which, he or she may wish to establish a long straddle. If, at expiration, the price of the underlying currency has gone up or down by more than the combined cost of the two options, the trader will profit. The trader s maximum potential loss is the cost of setting up the straddle. STRANGLES If a trader expects a currency to hold a target or range, he/she may wish to establish a position called a short strangle. To implement a short strangle, the trader sells a put and a call that have the same time to expiration but different strike prices. The overall goal of this strategy is to let the options expire worthless or to buy them back at a lower price. If the call has a higher strike price than the put, then if the price of the underlying currency is between the two strike prices at expiration, both the call and the put will expire worthless. Profi t from upward price movement Lose if price is flat Profi t from downward price movement Lose from upward price movement Profi t if price is flat Lose from downward price movement Be advised that this strategy, like all short strategies, carries a potentially unlimited risk. OPTIONS EDUCATION 9

10 GLOSSARY

11 OPTIONS GLOSSARY Ask: The price at which the spot market or an option can be bought. Same as an offer. Assignment: The process of turning a short option into a spot position. At the Money: This term refers to an option whose strike price is equal to the current spot market price. Base Currency: In a cross rate or currency pair, the currency that remains constant when determining the price. The base currency appears fi rst in a currency pair symbol. Basis Point: The standard unit used to describe the change in an option s value. For example, 1 basis point (0.01%) is equal to 1 pip in spot FX. Bearish: This term is used to describe a market sentiment that the price of a commodity will fall. Bear Spread: This options strategy is executed by buying an option with a higher strike and selling an option with a lower strike. The options can either both be calls or both puts, but they must have the same expiration. Bid: The price at which the spot market or an option can be sold. Breakeven: The market price at which a position earns neither a profi t nor loss. Bullish: This term is used to describe a market sentiment that the price of a commodity will rise. Bull Spread: This options strategy is executed by buying an option with a lower strike and selling an option with a higher strike. The options can either both be calls or both puts, but they must have the same expiration. Calendar Spread: This options strategy is executed by selling an option with a shorter expiration and buying an option with a longer expiration. The options can either both be calls or both puts, but they must have the same strike price. OPTIONS EDUCATION 11

12 Call (Option): A fi nancial instrument that gives the owner the right to buy a quantity of a spot market at a specifi c price within a specifi c time. Collar: An option strategy executed by selling (or buying) a put and buying (or selling) a call with different strikes but the same expiration. Covered Call (Covered Write): An option strategy executed by buying the spot market and selling an equivalent number of call options. Credit Spread: A spread position that results in a cash inflow. Cross (Rate): The rate of exchange between two currencies if one is not a major currency. Currency Pair: The rate of exchange between two currencies. Debit Spread: A spread position that results in a cash outflow. Delta: The rate that an option s premium changes relative to a change in the spot market if all other factors remain constant. Diagonal Spread: An option strategy executed by selling an option with a shorter expiration and buying an option with a longer expiration. The options can either both be calls or both puts, but they must have different strike prices. European Style: Options that can only be exercised into a spot position upon expiration. Exercise: The process of turning a long option into a spot position. Exercise Price (Strike Price): The price at which an option owner can buy or sell the spot market upon option exercise. Expiration: The termination of an option. Upon expiration, an option can no longer be traded or exercised. Gamma: The rate that an option s delta changes relative to a change in the spot market if all other market factors remain constant. Hedge: A position that offsets the risk associated with another position. In the Money: This term refers to an option that has intrinsic value. Call options are in the money if the spot price is greater than the strike price. Put options are in the money if the spot price is less than the strike price. OPTIONS EDUCATION 12

13 Intrinsic Value: The profi t that would result if an option were immediately exercised. It is also the amount that an option is in the money. For call options, the intrinsic value is equal to zero, or the spot price minus the strike price, whichever is greater. For put options, the intrinsic value is equal to zero, or the strike price minus the spot price, whichever is greater. Limit Order: An order to buy or sell at a specifi c price (limit), or at a price that is more benefi cial to the trader. Long: This term refers to an inventory of spot positions and/or options that have been bought. Margin: The amount of capital that must be allocated toward offsetting the risk associated with a position. Market Order: An order to buy at the current bid price or sell at the current ask price. Naked: This term refers to a short option position that is not covered. Near the Money: This term refers to an option whose strike price is nearly equal to the current spot market price. Offer: The price at which the spot market or an option can be bought. Same as an ask. Offset: A trade that liquidates a current position. Option: A fi nancial instrument that allows the owner the right to buy or sell a quantity of a spot market at a specifi c price within a specifi c time. Order: An instruction to buy or sell the spot market or an option. Out of the Money: This term refers to an option that has no intrinsic value. Call options are out of the money if the spot price is less than the strike price. Put options are out of the money if the spot price is greater than the strike price. Pip: The smallest increment that a spot market price can change. Premium: The price of an option. Psi: The amount that an option s price changes for a 1% (i.e., from 2% to 3%) change in the foreign interest rate if all other market factors remain constant. Put (Option): A fi nancial instrument that allows the owner the right to sell a quantity of a spot market at a specifi c price within a specifi c time. OPTIONS EDUCATION 13

14 Quote Currency: In a cross rate or currency pair, the currency that varies when determining the price. The quote currency appears second in a currency pair symbol. Rho: The amount that an option s price changes for a 1% (i.e., from 2% to 3%) change in the domestic interest rate if all other market factors remain constant. Short: This term refers to a spot position or option that has been sold. Spot (Market): The available rate for an immediate exchange of currency. Spread: The difference between the bid and ask. Spread Position: A position composed of a long option and a short option of the same type. Stop Order: An order type designating the execution of a market order when the market reaches a specifi c price (stop). Stop-Limit Order: An order type designating the execution of a limit order when the market reaches a specifi c price (stop). Straddle: An option strategy executed by buying or selling both a call option and a put option with the same strike and expiration. Strangle: An option strategy executed by buying or selling both a call option with a lower strike price and a put option with a higher strike price with the same expiration. Strike Price: The price at which an option owner can buy or sell the spot market upon their option being exercised. Synthetic Call: An option strategy executed by buying (or selling) the spot market and buying (or selling) a put. The profi t and loss associated with this position are equivalent to buying (or selling) a call with the same strike and expiration. Synthetic Put: An option strategy executed by selling (or buying) the spot market and buying (or selling) a call. The profi t and loss associated with this position are equivalent to buying (or selling) a put with the same strike and expiration. Synthetic Spot: An option strategy executed by selling (or buying) a put and buying (or selling) a call with the same strike and expiration. The profi t and loss associated with this position are equivalent to buying (or selling) the spot market. OPTIONS EDUCATION 14

15 Theta: The amount an option s value will change over time if all other market factors remain constant. Time Value: The amount of an option s value that is in excess of intrinsic value. Type: The classifi cation of an option, defi ned as either an option to buy (call) or an option to sell (put). Vega: The amount that an option s price changes for a 1% (i.e., from 12% to 13%) change in volatility if all other market factors remain constant. Vertical Spread: An option strategy executed by buying and selling options with different strikes but the same expiration. Volatility: A measure of the variation in the spot price. Write (an Option): To sell an option. OPTIONS EDUCATION 15

16 ASK FXDD DO YOU HAVE QUESTIONS ABOUT FX OPTIONS? ASK FXDD! FXDD IS TAKING ITS EDUCATION TO SOCIAL MEDIA. LOG IN TO YOUR PERSONAL ACCOUNT AND ASK US YOUR FOREX TRADING QUESTIONS. WE WILL PUBLISH THE ANSWERS TO YOUR QUESTIONS ON YOUTUBE, FACEBOOK AND TWITTER! CONTACT INFORMATION IF YOU D LIKE MORE INFORMATION ON FXDD AND TRADING FX OPTIONS, WE D LOVE TO HEAR FROM YOU! LIVE CHAT: Talk to a Forex specialist in real time. https://secure.fxdd.com/mt/en/live-talk.html CALL US: US: CONTINUE YOUR EDUCATION: OPTIONS EDUCATION 16

WELCOME TO FXDD S BULLISH OPTIONS STRATEGY GUIDE

WELCOME TO FXDD S BULLISH OPTIONS STRATEGY GUIDE GLOBAL INTRODUCTION WELCOME TO FXDD S BULLISH OPTIONS STRATEGY GUIDE A bullish options strategy is one of the most common starting points for options trading beginners. Bullish options strategies are designed

More information

WELCOME TO FXDD S BEARISH OPTIONS STRATEGY GUIDE

WELCOME TO FXDD S BEARISH OPTIONS STRATEGY GUIDE GLOBAL INTRODUCTION WELCOME TO FXDD S BEARISH OPTIONS STRATEGY GUIDE Bearish options strategies are options trading strategies that are designed to allow traders to profi t when an exchange rate trends

More information

WELCOME TO FXDD S RANGE & TARGET OPTIONS STRATEGY GUIDE

WELCOME TO FXDD S RANGE & TARGET OPTIONS STRATEGY GUIDE GLOBAL INTRODUCTION WELCOME TO FXDD S RANGE & TARGET OPTIONS STRATEGY GUIDE Range & target options strategies are options strategies that are designed to help traders profi t when the underlying exchange

More information

TABLE OF CONTENTS. Introduction Delta Delta as Hedge Ratio Gamma Other Letters Appendix

TABLE OF CONTENTS. Introduction Delta Delta as Hedge Ratio Gamma Other Letters Appendix GLOBAL TABLE OF CONTENTS Introduction Delta Delta as Hedge Ratio Gamma Other Letters Appendix 3 4 5 7 9 10 HIGH RISK WARNING: Before you decide to trade either foreign currency ( Forex ) or options, carefully

More information

WELCOME TO FXDD S BREAKOUT OPTIONS STRATEGY GUIDE

WELCOME TO FXDD S BREAKOUT OPTIONS STRATEGY GUIDE GLOBAL INTRODUCTION WELCOME TO FXDD S BREAKOUT OPTIONS STRATEGY GUIDE Breakout options strategies have been popularized as options trading strategies that allow traders to profi t regardless of the direction

More information

Chapter 3.4. Forex Options

Chapter 3.4. Forex Options Chapter 3.4 Forex Options 0 Contents FOREX OPTIONS Forex options are the next frontier in forex trading. Forex options give you just what their name suggests: options in your forex trading. If you have

More information

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options.

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options. Getting started with FX options WHS FX options guide Predict the trend in currency markets or hedge your positions with FX options. Refine your trading style and your market outlook. Learn how FX options

More information

Table of Contents. Bullish Strategies

Table of Contents. Bullish Strategies Table of Contents Bullish Strategies 1. Long Call 03 2. Synthetic Long Call 04 3. Short Put 06 4. Covered Call 07 5. Long Combo 08 6. The Collar 09 7. Bull Call Spread 10 8. Bull Put Spread 11 9. Call

More information

FX Options NASDAQ OMX

FX Options NASDAQ OMX FX Options OPTIONS DISCLOSURE For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which

More information

Buying Call or Long Call. Unlimited Profit Potential

Buying Call or Long Call. Unlimited Profit Potential Options Basis 1 An Investor can use options to achieve a number of different things depending on the strategy the investor employs. Novice option traders will be allowed to buy calls and puts, to anticipate

More information

Guide to Options Strategies

Guide to Options Strategies RECOGNIA S Guide to Options Strategies A breakdown of key options strategies to help you better understand the characteristics and implications of each Recognia s Guide to Options Strategies 1 3 Buying

More information

Swing Trade Warrior Chapter 1. Introduction to swing trading and how to understand and use options How does Swing Trading Work? The idea behind swing trading is to capitalize on short term moves of stocks

More information

Introduction to Options

Introduction to Options Introduction to Options By: Peter Findley and Sreesha Vaman Investment Analysis Group What Is An Option? One contract is the right to buy or sell 100 shares The price of the option depends on the price

More information

OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET

OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET Dr. Rashmi Rathi Assistant Professor Onkarmal Somani College of Commerce, Jodhpur ABSTRACT Options are important derivative securities trading all over

More information

VANILLA OPTIONS MANUAL

VANILLA OPTIONS MANUAL VANILLA OPTIONS MANUAL BALANCE YOUR RISK WITH OPTIONS Blue Capital Markets Limited 2013. All rights reserved. Content Part A The what and why of options 1 Types of options: Profit and loss scenarios 2

More information

Steve Meizinger. Understanding the FX Option Greeks

Steve Meizinger. Understanding the FX Option Greeks Steve Meizinger Understanding the FX Option Greeks For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin

More information

How to Trade Options: Strategy Building Blocks

How to Trade Options: Strategy Building Blocks How to Trade Options: Strategy Building Blocks MICHAEL BURKE Important Information and Disclosures This course is provided by TradeStation, a U.S.-based multi-asset brokerage company that seeks to serve

More information

Options Strategies. 26 proven options strategies

Options Strategies. 26 proven options strategies asx 267_cover 25/8/9 1:32 PM Page 2 Options Strategies 26 proven options strategies Information line: 131 279 www.asx.com.au HOW TO USE THIS BOOKLET This brochure details more than two dozen strategies

More information

FINANCIAL ENGINEERING CLUB TRADING 101

FINANCIAL ENGINEERING CLUB TRADING 101 FINANCIAL ENGINEERING CLUB TRADING 101 WHAT IS TRADING TRADING/INVESTING is the act of putting capital to use, by either buying or selling securities, for the purpose of gaining profits. Buy low, sell

More information

Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA

Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA All content included in this book, such as text, graphics, logos,

More information

Reference Manual Currency Options

Reference Manual Currency Options Reference Manual Currency Options TMX Group Equities Toronto Stock Exchange TSX Venture Exchange TMX Select Equicom Derivatives Montréal Exchange CDCC Montréal Climate Exchange Fixed Income Shorcan Energy

More information

www.optionseducation.org OIC Options on ETFs

www.optionseducation.org OIC Options on ETFs www.optionseducation.org Options on ETFs 1 The Options Industry Council For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations,

More information

General Forex Glossary

General Forex Glossary General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

More information

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT CONTENTS An Exchange with Credentials (Page 3) Introduction to Derivatives»

More information

MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS

MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS CLIENT SERVICE AGREEMENT Halifax New Zealand Limited Client Service Agreement Product Disclosure Statement for MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS Halifax New Zealand Limited Financial

More information

Spread Bet & CFD Options Reference Sheet

Spread Bet & CFD Options Reference Sheet Spread Bet & CFD Options Reference Sheet What are options? There are two types of options: calls and puts. Call option: The buyer of the call option has the right (but not the obligation) to buy an agreed

More information

Derivatives - Options Theory September 2008

Derivatives - Options Theory September 2008 - Options Theory September 2008 Milestone International Tax Consultants Ltd 45 Clarges Street London W1J 7EP Tel: +44 (0)20 7016 5480 Fax: +44 (0)20 7016 5481 Web: www.milestonetax.com Definitions Option

More information

Currency Options. www.m-x.ca

Currency Options. www.m-x.ca Currency Options www.m-x.ca Table of Contents Introduction...3 How currencies are quoted in the spot market...4 How currency options work...6 Underlying currency...6 Trading unit...6 Option premiums...6

More information

The foreign exchange market is global, and it is conducted over-the-counter (OTC)

The foreign exchange market is global, and it is conducted over-the-counter (OTC) FOREIGN EXCHANGE BASICS TERMS USED IN FOREX TRADING: The foreign exchange market is global, and it is conducted over-the-counter (OTC) through the use of electronic trading platforms, or by telephone through

More information

THE POWER OF FOREX OPTIONS

THE POWER OF FOREX OPTIONS THE POWER OF FOREX OPTIONS TOPICS COVERED Option basics Call options Put Options Why trade options? Covered call Covered put Hedging your position using options How to repair a trading position THE POWER

More information

CURRENCY TRADER. Currency Trading. Introduction to currency futures. What are currency futures?

CURRENCY TRADER. Currency Trading. Introduction to currency futures. What are currency futures? Introduction to currency futures The South African Rand is one of the most volatile currencies in the world; it can exhibit moves of greater than 0.20c in a single day of trading versus the US dollar.

More information

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION CHAPTER 7 Options INTRODUCTION An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties to the contract are the buyer and the

More information

The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and

The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and you can lose money as well as make money. Manage your

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

More information

Currency Derivatives Guide

Currency Derivatives Guide Currency Derivatives Guide What are Futures? In finance, a futures contract (futures) is a standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality

More information

CommSeC CFDS: IntroDuCtIon to FX

CommSeC CFDS: IntroDuCtIon to FX CommSec CFDs: Introduction to FX Important Information This brochure has been prepared without taking account of the objectives, financial and taxation situation or needs of any particular individual.

More information

Plus500AU Pty Ltd. Product Disclosure Statement

Plus500AU Pty Ltd. Product Disclosure Statement Plus500AU Pty Ltd Product Disclosure Statement Product Disclosure Statement Our Contact Details Issuer: PLUS500AU Pty Ltd ACN 153 301 681 Address: Level 19, 1 O Connell Street Sydney NSW 2000 Australia

More information

Strategies in Options Trading By: Sarah Karfunkel

Strategies in Options Trading By: Sarah Karfunkel Strategies in Options Trading By: Sarah Karfunkel Covered Call Writing: I nvestors use two strategies involving stock options to offset risk: (1) covered call writing and (2) protective puts. The strategy

More information

EXCHANGE TRADED OPTIONS

EXCHANGE TRADED OPTIONS EXCHANGE TRADED OPTIONS A SELF STUDY GUIDE TO TRADING EQUITY OPTIONS NZX EDUCATION This document is provided for general information purposes and is not intended as, and shall not constitute, investment

More information

Risks involved with futures trading

Risks involved with futures trading Appendix 1: Risks involved with futures trading Before executing any futures transaction, the client should obtain information on the risks involved. Note in particular the risks summarized in the following

More information

The Four Basic Options Strategies

The Four Basic Options Strategies 1 The Four Basic Options Strategies Introduction The easiest way to learn options is with pictures so that you can begin to piece together strategies step-by-step. However, first we need to understand

More information

FX Derivatives Terminology. Education Module: 5. Dated July 2002. FX Derivatives Terminology

FX Derivatives Terminology. Education Module: 5. Dated July 2002. FX Derivatives Terminology Education Module: 5 Dated July 2002 Foreign Exchange Options Option Markets and Terminology A American Options American Options are options that are exercisable for early value at any time during the term

More information

Risk / Reward Maximum Loss: Limited to the premium paid up front for the option. Maximum Gain: Unlimited as the market rallies.

Risk / Reward Maximum Loss: Limited to the premium paid up front for the option. Maximum Gain: Unlimited as the market rallies. Bullish Strategies Bullish options strategies are employed when the options trader expects the underlying stock price to move upwards. It is necessary to assess how high the stock price can go and the

More information

FX Key products Exotic Options Menu

FX Key products Exotic Options Menu FX Key products Exotic Options Menu Welcome to Exotic Options Over the last couple of years options have become an important tool for investors and hedgers in the foreign exchange market. With the growing

More information

FX, Derivatives and DCM workshop I. Introduction to Options

FX, Derivatives and DCM workshop I. Introduction to Options Introduction to Options What is a Currency Option Contract? A financial agreement giving the buyer the right (but not the obligation) to buy/sell a specified amount of currency at a specified rate on a

More information

SeDeX. Covered Warrants and Leverage Certificates

SeDeX. Covered Warrants and Leverage Certificates SeDeX Covered Warrants and Leverage Certificates SeDeX Leverage products increase the potential performance of the portfolio. Foreword Leverage effect amplifies both underlying rises and falls Covered

More information

Handbook FXFlat FX Options

Handbook FXFlat FX Options Handbook FXFlat FX Options FXFlat Trading FX Options When you open an FX options account at FXFlat, you can trade options on currency pairs 24- hours a day, 5.5 days per week. The FX options features in

More information

Frequently Asked Questions on Derivatives Trading At NSE

Frequently Asked Questions on Derivatives Trading At NSE Frequently Asked Questions on Derivatives Trading At NSE NATIONAL STOCK EXCHANGE OF INDIA LIMITED QUESTIONS & ANSWERS 1. What are derivatives? Derivatives, such as futures or options, are financial contracts

More information

Underlier Filters Category Data Field Description

Underlier Filters Category Data Field Description Price//Capitalization Market Capitalization The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Market Capitalization is not applicable

More information

Fundamentals of Futures and Options (a summary)

Fundamentals of Futures and Options (a summary) Fundamentals of Futures and Options (a summary) Roger G. Clarke, Harindra de Silva, CFA, and Steven Thorley, CFA Published 2013 by the Research Foundation of CFA Institute Summary prepared by Roger G.

More information

1. HOW DOES FOREIGN EXCHANGE TRADING WORK?

1. HOW DOES FOREIGN EXCHANGE TRADING WORK? XV. Important additional information on forex transactions / risks associated with foreign exchange transactions (also in the context of forward exchange transactions) The following information is given

More information

General Risk Disclosure

General Risk Disclosure General Risk Disclosure Colmex Pro Ltd (hereinafter called the Company ) is an Investment Firm regulated by the Cyprus Securities and Exchange Commission (license number 123/10). This notice is provided

More information

Option Theory Basics

Option Theory Basics Option Basics What is an Option? Option Theory Basics An option is a traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon, or derived

More information

POLICY STATEMENT Q-22

POLICY STATEMENT Q-22 POLICY STATEMENT Q-22 DISCLOSURE DOCUMENT FOR COMMODITY FUTURES CONTRACTS, FOR OPTIONS TRADED ON A RECOGNIZED MARKET AND FOR EXCHANGE-TRADED COMMODITY FUTURES OPTIONS 1. In the case of commodity futures

More information

NAB Foreign Exchange Transactions. Full Participation FX Solutions Products Product Disclosure Statement

NAB Foreign Exchange Transactions. Full Participation FX Solutions Products Product Disclosure Statement NAB Foreign Exchange Transactions Full Participation FX Solutions Products Product Disclosure Statement Effective date of issue 3 September 2012 Important information Issuer and contact details This Product

More information

INTRODUCTION. This program should serve as just one element of your due diligence.

INTRODUCTION. This program should serve as just one element of your due diligence. FOREX ONLINE LEARNING PROGRAM INTRODUCTION Welcome to our Forex Online Learning Program. We ve always believed that one of the best ways to protect investors is to provide them with the materials they

More information

metals products Options Strategy Guide for Metals Products

metals products Options Strategy Guide for Metals Products metals products Options Guide for Metals Products As the world s largest and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. CME Group exchanges CME, CBOT, NYMEX

More information

FINANCIAL ENGINEERING CLUB TRADING 201

FINANCIAL ENGINEERING CLUB TRADING 201 FINANCIAL ENGINEERING CLUB TRADING 201 STOCK PRICING It s all about volatility Volatility is the measure of how much a stock moves The implied volatility (IV) of a stock represents a 1 standard deviation

More information

1. Exercise or Strike Price price at which assets can be purchased (call) or sold (put).

1. Exercise or Strike Price price at which assets can be purchased (call) or sold (put). CHAPTER 15. OPTIONS MARKETS Options are traded in: Common stocks Foreign exchanges Agricultural commodities Precious metals Interest Rates The Options Contract Two basic types of Options: Calls and Puts

More information

NEW TO FOREX? FOREIGN EXCHANGE RATE SYSTEMS There are basically two types of exchange rate systems:

NEW TO FOREX? FOREIGN EXCHANGE RATE SYSTEMS There are basically two types of exchange rate systems: NEW TO FOREX? WHAT IS FOREIGN EXCHANGE Foreign Exchange (FX or Forex) is one of the largest and most liquid financial markets in the world. According to the authoritative Triennial Central Bank Survey

More information

Learn to trade options OPTION STRATEGIES TRADERS

Learn to trade options OPTION STRATEGIES TRADERS Learn to trade options OPTION STRATEGIES TRADERS PREFACE Dear trader, When we introduced multi-leg option strategies in our Questrade IQ trading platforms, we saw many of our clients embrace the service.

More information

Basic Option Trading Strategies

Basic Option Trading Strategies Basic Option Trading Strategies What is an option? Definition Option an intangible right bought or sold by a trader to control 100 shares of a security; it expires on a specific date in the future. The

More information

Week 1: Futures, Forwards and Options derivative three Hedge: Speculation: Futures Contract: buy or sell

Week 1: Futures, Forwards and Options derivative three Hedge: Speculation: Futures Contract: buy or sell Week 1: Futures, Forwards and Options - A derivative is a financial instrument which has a value which is determined by the price of something else (or an underlying instrument) E.g. energy like coal/electricity

More information

THE EQUITY OPTIONS STRATEGY GUIDE

THE EQUITY OPTIONS STRATEGY GUIDE THE EQUITY OPTIONS STRATEGY GUIDE APRIL 2003 Table of Contents Introduction 2 Option Terms and Concepts 4 What is an Option? 4 Long 4 Short 4 Open 4 Close 5 Leverage and Risk 5 In-the-money, At-the-money,

More information

Derivative strategies using

Derivative strategies using FP CLASSROOM Derivative strategies using options Derivatives are becoming increasingly important in the world of finance. A Financial Planner can use the strategies to increase profitability, hedge portfolio

More information

Underlying (S) The asset, which the option buyer has the right to buy or sell. Notation: S or S t = S(t)

Underlying (S) The asset, which the option buyer has the right to buy or sell. Notation: S or S t = S(t) INTRODUCTION TO OPTIONS Readings: Hull, Chapters 8, 9, and 10 Part I. Options Basics Options Lexicon Options Payoffs (Payoff diagrams) Calls and Puts as two halves of a forward contract: the Put-Call-Forward

More information

Introduction to Index Futures and Options

Introduction to Index Futures and Options Introduction to Index Futures and Options Disclaimer of Liability Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice

More information

FAS 133 Reporting and Foreign Currency Transactions

FAS 133 Reporting and Foreign Currency Transactions FAS 133 Reporting and Foreign Currency Transactions Participating Forwards An opinion on the Appropriate Accounting & Authority with Relevant Accounting Citations RISK LIMITED CORPORATION 2007 Risk Limited

More information

Steve Meizinger. FX Options Pricing, what does it Mean?

Steve Meizinger. FX Options Pricing, what does it Mean? Steve Meizinger FX Options Pricing, what does it Mean? For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or

More information

UNDERSTANDING INDEX OPTIONS

UNDERSTANDING INDEX OPTIONS UNDERSTANDING INDEX OPTIONS The Options Industry Council (OIC) is an industry cooperative created to educate the investing public and brokers about the benefits and risks of exchange-traded options. Options

More information

CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS

CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS Unless otherwise stated the options we consider are all European. Toward the end of this chapter, we will argue that if European options were available with

More information

CFDs YOUR STARTER KIT

CFDs YOUR STARTER KIT CFDs YOUR STARTER KIT Risk Warning: Forex and CFDs are leveraged products and you may lose your initial deposit as well as substantial amounts of your investment. Trading leveraged products carries a high

More information

RISK DISCLOSURE STATEMENT PRODUCT INFORMATION

RISK DISCLOSURE STATEMENT PRODUCT INFORMATION This statement sets out the risks in trading certain products between Newedge Group ( NEWEDGE ) and the client (the Client ). The Client should note that other risks will apply when trading in emerging

More information

Covered Calls. Benefits & Tradeoffs

Covered Calls. Benefits & Tradeoffs 748627.1.1 1 Covered Calls Enhance ETFs with Options Strategies January 26, 2016 Joe Burgoyne, OIC Benefits & Tradeoffs Joe Burgoyne Director, Options Industry Council www.optionseducation.org 2 The Options

More information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information Options For individuals, companies, trusts and SMSFs The Options and Lending Facility Contents 2 What are Options? 3 Ways to use Options 7 Getting started 8 Frequently asked questions 13 Contact us 14

More information

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems 11 Option Payoffs and Option Strategies Answers to Questions and Problems 1. Consider a call option with an exercise price of $80 and a cost of $5. Graph the profits and losses at expiration for various

More information

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES The Options Industry Council (OIC) is a non-profit association created to educate the investing public and brokers about the benefits and risks of exchange-traded

More information

} } Global Markets. Currency options. Currency options. Introduction. Options contracts. Types of options contracts

} } Global Markets. Currency options. Currency options. Introduction. Options contracts. Types of options contracts Global Markets Currency options Currency options Introduction Currency options have gained acceptance as invaluable tools in managing foreign exchange risk. They are extensively used and bring a much wider

More information

Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC

Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC www.optionseducation.org 2 The Options Industry Council Options involve risks and are not suitable for everyone. Prior to buying

More information

Risk Explanation for Exchange-Traded Derivatives

Risk Explanation for Exchange-Traded Derivatives Risk Explanation for Exchange-Traded Derivatives The below risk explanation is provided pursuant to Hong Kong regulatory requirements relating to trading in exchange-traded derivatives by those of our

More information

Introduction to Options -- The Basics

Introduction to Options -- The Basics Introduction to Options -- The Basics Dec. 8 th, 2015 Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917. 2015 FMR LLC. All rights reserved. 744692.1.0 Disclosures Options

More information

Bull Call Spread. BACK TO BASICS: Spread Yourself Around: Example. By David Bickings, Optionetics.com

Bull Call Spread. BACK TO BASICS: Spread Yourself Around: Example. By David Bickings, Optionetics.com Bull Call Spread BACK TO BASICS: Spread Yourself Around: Example By David Bickings, Optionetics.com Options are a fantastic investment to make money on the rise and fall of an asset. This is no surprise

More information

Options. Understanding options strategies

Options. Understanding options strategies Options Understanding options strategies Contents Introduction 2 Option profiles 3 Covered write 4 Protected covered write 6 Stock repair strategy 8 Bull spread 10 Bear spread 12 Long straddle 14 Short

More information

RISK DISCLOSURE STATEMENT FOR FOREX TRADING AND IB MULTI- CURRENCY ACCOUNTS

RISK DISCLOSURE STATEMENT FOR FOREX TRADING AND IB MULTI- CURRENCY ACCOUNTS RISK DISCLOSURE STATEMENT FOR FOREX TRADING AND IB MULTI- CURRENCY ACCOUNTS Rules of the U.S. National Futures Association ("NFA") require Interactive Brokers ("IB") to provide you with the following Risk

More information

Guide to Options Trading. NZX Derivatives Market

Guide to Options Trading. NZX Derivatives Market Guide to Options Trading NZX Derivatives Market CONTENTS WHAT ARE OPTIONS? 3 COMPONENTS OF AN OPTION 4 ADVANTAGES OF TRADING OPTIONS 5 PAYOFF DIAGRAMS 7 GLOSSARY 9 Disclaimer: This Disclaimer relates to

More information

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0 A ADR-Style: for a derivative on an underlying denominated in one currency, where the derivative is denominated in a different currency, payments are exchanged using a floating foreign-exchange rate. The

More information

Blue Capital Markets Limited 2013. All rights reserved.

Blue Capital Markets Limited 2013. All rights reserved. Blue Capital Markets Limited 2013. All rights reserved. Content What are Options? 1 What types of forex options can I trade with easy-forex? 1 I m new to forex can I trade options? 1 How do I trade easy-forex

More information

Steve Meizinger. Developing an FX Trading Strategy

Steve Meizinger. Developing an FX Trading Strategy Steve Meizinger Developing an FX Trading Strategy Steve Meizinger www.ise.com Smeizinger@ise.com For the sake of simplicity, the examples that follow do not take into consideration commissions and other

More information

No more stock standard choices Choose Style Options

No more stock standard choices Choose Style Options No more stock standard choices Choose Style Options DERIVATIVE MARET Equity Derivatives Style Options www.jse.co.za Johannesburg Stock Exchange The Options Strategy Spectrum BEARISH NEUTRAL BULLISH write

More information

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape TMX TRADING SIMULATOR QUICK GUIDE Reshaping Canada s Equities Trading Landscape OCTOBER 2014 Markets Hours All market data in the simulator is delayed by 15 minutes (except in special situations as the

More information

Options Product Disclosure Statement (PDS)

Options Product Disclosure Statement (PDS) Options Product Disclosure Statement (PDS) ISSUE DATE: JUNE 2015 The provider of the services described in this Client Agreement is the Australian Financial Services Licensee, OpenMarkets Australia Limited

More information

Investment Finance 421-002 Prototype Midterm I

Investment Finance 421-002 Prototype Midterm I Investment Finance 421-002 Prototype Midterm I The correct answer is highlighted by a *. Also, a concise reasoning is provided in Italics. 1. are an indirect way U. S. investor can invest in foreign companies.

More information

Trading INR Options on DGCX

Trading INR Options on DGCX Trading INR Options on DGCX DGCX Options on INR/US$ Futures Contract Options on INR futures open the door to a host of versatile trading strategies; by using options alone, or in combination with INR futures,

More information

INTRODUCTION TO OPTIONS MARKETS QUESTIONS

INTRODUCTION TO OPTIONS MARKETS QUESTIONS INTRODUCTION TO OPTIONS MARKETS QUESTIONS 1. What is the difference between a put option and a call option? 2. What is the difference between an American option and a European option? 3. Why does an option

More information

Intro to Forex and Futures

Intro to Forex and Futures Intro to Forex and Futures 1 Forex Trading Forex is a term meaning foreign exchange, and refers to trading the currency of one country against the currency from another country simultaneously. Over $1.4

More information

6. Foreign Currency Options

6. Foreign Currency Options 6. Foreign Currency Options So far, we have studied contracts whose payoffs are contingent on the spot rate (foreign currency forward and foreign currency futures). he payoffs from these instruments are

More information

There are two types of options - calls and puts.

There are two types of options - calls and puts. Options on Single Stock Futures Overview Options on single Stock Futures An SSF option is, very simply, an instrument that conveys to its holder the right, but not the obligation, to buy or sell an SSF

More information

Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes!

Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes! Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes! Disclaimer U.S. GOVERNMENT REQUIRED DISCLAIMER COMMODITY FUTURES TRADING COMMISSION FUTURES AND OPTIONS TRADING HAS LARGE

More information